memory_limit is just as a highway speed limit is per-vehicle. And a highway can have an infinite amount of lanes (parallel processes), and an infinite amount of cars.
PHP Memory limit is the maximum amount of memory one PHP process is allowed to use. One PHP process is usually a page view.
Memory limit is not the same as RAM
While RAM is the total available memory, the memory limit is per PHP process. That means that your site can consume e.g 10 GB of RAM, with a memory limit of 256 MB. We do not limit the amount of RAM you can use, just the memory limit.